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Venezuela announces end to exchange controls after 16 years

In this May 8, 2019 photo, a woman counts 5,000 Bolivars, almost one dollar, to buy a bag of bananas in the Petare area of Caracas, Venezuela. (MARTIN MEJIA / AP)

CARACAS, Venezuela — Venezuela has lifted foreign exchange controls on banks for the first time in 16 years, but some observers were skeptical Monday that the measure will do much to lift the shrinking economy.

Venezuela's financial problems have intensified because of a sharp reduction in oil exports, a key source of foreign currency

Few people lined up at money exchange windows in private banks in Caracas to take advantage of the new policy. One man, Rodolfo Gutiérrez, said Venezuela's hyperinflation is so severe that many people find it hard to buy dollars and are focused on buying whatever food they can.

Economist Asdrúbal Oliveros said some private institutions struggle to do international transactions because of US sanctions imposed in a campaign aimed at pressuring President Nicolás Maduro out of office.

"An exchange control can't be lifted by decree. There have to be the conditions for it," Oliveros said.

The exchange controls were imposed by Maduro's predecessor, Hugo Chávez, following an attempted coup in 2002.

The Venezuelan government took steps in August to loosen controls, allowing people and companies to buy and sell dollars through exchange houses subject to regulations on the price and amount. But the measure had little success due to the scarcity of foreign currency. For years, Venezuela has had a flourishing black market in which dollars are sold for more than the official rate, currently at 5,200 bolivares to the dollar.

Customer line up outside a branch of Banco Provincial bank in Caracas, Venezuela, May 13, 2019. (FERNANDO LLANO / AP)

Venezuela's financial problems have intensified because of a sharp reduction in oil exports, a key source of foreign currency. The oil industry is under US sanctions as Washington and its allies try to open the way for opposition leader Juan Guaidó to replace Maduro, who says he is the target of a coup plot.

Russia is a key ally of Maduro. So is China, which delivered a planeload of 71 tons of medical supplies to Venezuela's main airport Monday.

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